Background:The original High Court, which lasted for 87 days, found Jim Flavin did not have price-sensitive information, writes Laura Slattery

Running for 87 days in the High Court in 2005, the "insider trading" action by fruit importer Fyffes against industrial holding group DCC centred on the sale in February, 2000 by DCC of its 10 per cent stakeholding in Fyffes.

The €106 million sale of the shares on three dates that month generated a profit of €85 million for the company.

Mr Flavin, who handled the sale, was also a director of Fyffes, and had access to trading reports which the High Court found were "very bad news for Fyffes".

But the High Court agreed with Mr Flavin and DCC's argument that the two sets of management trading accounts given to him in January 2000 did not constitute price-sensitive information, as alleged by Fyffes in its pursuit of €85 million compensation. The Supreme Court has now overturned the High Court's finding.

Part of Mr Flavin and DCC's argument was that by not issuing a profit warning, the actions of Fyffes at the time showed the fruit importer did not consider the documents to be price-sensitive, or information that would be likely to affect a company's share price if it became generally known.

The High Court judge, Ms Justice Mary Laffoy, accepted this argument, finding there was "a fundamental incongruity" between Fyffes' conduct in early 2000 and its claim that Mr Flavin had price-sensitive information.

If a person in possession of price-sensitive information about a company trades in that company's shares, it is generally considered to be insider trading.

Price-sensitive information is usually information that would indicate that a company's performance is likely to be better, or worse, than is being expected in the market. A plc must inform the market if there is a significant change in its expectations and so, if a company's trading is significantly worse than the market believes it to be, it must consider issuing a profit warning.

Mr Flavin and DCC pointed out that in December 1999 Fyffes had issued a positive outlook statement for the financial year 2000, predicting further growth.

It was not until March 20th, 2000, that Fyffes issued a statement to the market advising it that it did not believe it would match its previous year's half-year result. The share price fell sharply, dropping 25 per cent.

Fyffes responded that a company must exercise judgment on timing in relation to the issuing of profit warnings.

When asked why Fyffes had issued a positive outlook statement in December 1999 when it was aware that the early months of 2000 were going to be difficult, David McCann said the company had been hoping trading would improve in January 2000.

When this did not occur, he began to hope the fruits of two lawsuits would boost Fyffes' figures for the first half of 2000. When it became clear this would not happen, the company made its profit warning, he said.

The issue as to whether the information available to Mr Flavin in February 2000 was price-sensitive or not was complicated by the interest in Fyffes shares because of its worldoffruit.com project. This was at the height of the dotcom boom and it was argued that investors were more interested in this project than in the health of fruit trading.

The defendants also argued that, even if the information that was available to Mr Flavin was price-sensitive, this did not matter as trading in the Fyffes shares was done independently by a Dutch-resident DCC subsidiary, Lotus Green, established as part of a tax structure devised by DCC to save it having to pay capital gains tax on the Fyffes shareholding, once it was sold. Fyffes argued that DCC effectively controlled Lotus Green.

In the appeal hearing, Fyffes said that the High Court's use of a test involving how a "reasonable investor" would have reacted if given the information available to Mr Flavin was not provided for in the Companies Act. There was no definition of what constituted a "reasonable investor".

Fyffes also said the High Court had made "a fundamental error" in deciding not to consider the impact of the March profit warning when considering if the information available to Mr Flavin at the time of the share sales was price-sensitive.